Magnificent Seven Tech Giants To Propel S&P 500 Buyback: Goldman Sachs Says Repurchases Poised For $1 Trillion By 2025

Goldman Sachs projects that S&P 500 companies will escalate their share buybacks to reach $925 billion in 2024, marking a 13% YoY surge, and this momentum is expected to persist, hitting over $1 trillion in 2025.

What Happened: Goldman Sachs forecasts a robust resurgence in share repurchases in 2024 by S&P 500 firms, propelled by the Magnificent Seven. These include Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, contributing to 26% of S&P 500 buybacks in 2023, CNBC reported on Thursday.

Share buybacks saw a 14% dip in 2023 due to restrained earnings growth, elevated capital costs, and macroeconomic uncertainties. Nonetheless, Goldman analysts David Kostin and Cormac Conners anticipate a buyback surge as large tech firms report earnings that surpass expectations, boosting earnings per share and enhancing value for current shareholders.

Companies like Meta Platforms amplified their share buyback program by $50 billion, with $30.93 billion of sanctioned shares available for repurchase as of Dec. 31, 2023. Goldman’s buyback basket superseded the S&P 500 by 4 percentage points since the commencement of Q4 2023.

Buybacks may also boost the companies' stocks. "Investors have rewarded companies for engaging in share buybacks more than other uses of cash in recent months," Goldman found. 

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Why It Matters: Despite looming threats, UBS remains positive about the market’s future, signaling a sustained rally.

In contrast, veteran analyst Milton Berg warns of a potential 60% market crash amid recession fears. However, Satori Fund founder Dan Niles has faith in the earnings potential of tech giants like Nvidia, Meta, Microsoft, and Amazon to drive their 2024 performance.

Adding to the optimism, Fed Chair Jerome Powell‘s hints at potential rate cuts fueled the S&P 500‘s surge past its record high.

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